Studies show that organizations that encourage ethical behavior are more resistant to misconduct of all kinds, including financial reporting fraud. A strong ethical culture hedges against all three sides of the fraud triangle – pressure, opportunity, and rationalization. In an ethical culture, pressure to commit fraud is counteracted through sound risk management strategies and appropriate incentives. It will support well-designed controls that reduce opportunities for fraud and increase the likelihood of early detection. A culture of honesty limits an individual’s ability to rationalize fraudulent actions.
Management is primarily responsible for an organization’s culture, and together with the board of directors, sets the “tone at the top” by communicating and visibly adhering to clear ethical principles and codes of conduct and by providing necessary support and resources for robust fraud risk management programs and internal controls.
Another vital ingredient in an ethical culture is skepticism. Management should encourage employees to not only feel comfortable but obliged to question and challenge the results for which they are responsible.
The Anti-Fraud Collaboration produces resources aimed at helping corporations nurture cultures that help deter and detect fraud and equips all stakeholders within the financial reporting supply chain with the tools they need to fight fraud.
Take a look at our corporate culture resources below:
Sound corporate culture is a cornerstone of fraud deterrence and detection. This webcast, hosted by the Anti-Fraud Collaboration, highlights best practices on assessing and strengthening a company’s corporate culture. An expert panel shares actionable recommendations...
When fraud is identified or suspected in an organization, companies and their boards are not always aware of what steps to take. The SEC’s Division of Enforcement formal Cooperation Program includes various measures designed to encourage individuals and companies to...
Misconduct by any employee can potentially ruin any organization. Management typically institutes a variety of processes to minimize this risk and analyze and address any alleged transgressions. In an effort to better understand the factors that impede the reporting...
The Anti-Fraud Collaboration has developed six short video vignettes for use with the LDC Cloud Systems Case Study. In each vignette, actors reenact several interactions selected from the case study. The videos, which can also be found on YouTube, do not provide...
The LDC Cloud Systems Case Study is another installment in the Anti-Fraud Collaboration’s successful series of case studies. Participants in case study teachings start with a hypothetical scenario about a fictional company dealing with a fraud. Guided by an...
Effective accounting policies and internal controls are key for stemming fraud and reducing the number of financial restatements. But how can companies improve in these two areas? This webcast, hosted by the Anti-Fraud Collaboration, highlights best practice...